DJ ROSTELECOM PJSC: Rostelecom announces its IFRS financial and operating results for the first quarter of 2020
ROSTELECOM PJSC (RKMD)
ROSTELECOM PJSC: Rostelecom announces its IFRS financial and operating
results for the first quarter of 2020
19-May-2020 / 09:32 MSK
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
rostelecom announces its ifrs financial and operating results
for the first quarter of 2020[1]
Revenue growth of 10%; 12% increase in OIBDA[2]; mobile revenue up 16%
Moscow, Russia - May 19, 2020 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX:
ROSYY), the largest digital integrated service provider in Russia, today
announces its consolidated financial results for the first quarter of 2020
prepared in accordance with IFRS[3], with an overview also provided on how
on the Company has responded to the COVID-19 pandemic, and what impact it is
having on the business.
In accordance with the accounting policy of the Group, the acquisition of
Tele2 Russia has been recognized as a business combination under common
control. According to this method the merger of businesses arising from a
transfer of entity stakes under common control of the Group's shareholders,
is presented as if the merger took place in the earliest period of the
statements, or, if later, effective from the date that common control was
put into effect; for this purpose comparatives are revised. Rostelecom's
consolidated financial statements for 2019 have therefore been revised to
incorporate Tele2 Russia's performance as if the acquisition had been
completed on 1 January 2019.
COVID-19
The unprecedented situation caused by the COVID-19 (coronavirus) pandemic
has created a dynamic and intense environment for people and organizations
around the world, including Rostelecom's employees and clients. Amid
constraints around physical movement, the stability of ICT infrastructure
and the prevalence of digitalization are playing an increasingly important
role. As a company of strategic importance to the Russian Federation, it is
essential that Rostelecom continues to provide reliable services to support
the Russian economy, millions of Russian families that require our
infrastructure as well as a significant number of organizations across the
country.
To ensure business continuity and to enable Rostelecom to navigate the
impact of COVID-19, Rostelecom has taken the following actions.
Protecting employees
- Starting from March 16, 2020, a work from home policy has been
implemented to limit the majority of office employees' exposure to the
virus without compromising their ability to remain connected, productive
and to work securely. This has required adding extra capacity and
technology equipment to permit a large-scale transition. To date, around
60,000 employees have been working from home. All staff have been provided
with remote access to their workplaces, corporate mail, IT systems and
smart solutions for audio and video conferencing. IT infrastructure has
been re-organized, partially based on the Company's internal network and
owned programmes such as Tionix Virtual Desktop (VDI), located in
Rostelecom's data centers.
- On-site staff responsible for the continuity of business processes and
front-line employees have been provided with sets of personal protective
equipment, including masks, gloves and sanitizers.
- Continuous monitoring systems have been put in place to ensure
occupational safety and to protect the health protection of our people and
their families.
- A permanent remote working policy is under development for after the
Covid-19 pandemic. The initiative will generate more attractive working
conditions for staff and allow significant cost savings on office rent and
maintenance going forward.
Ensuring business resilience
- Complex organizational and technical measures have been developed to
ensure that national telecommunications infrastructure [1] remains
resilient. The investment programme has been recalibrated to support
priority projects, such as improving the strength and capacity of networks
and IT infrastructure in response to pent-up demand in consumer broadband
caused by self-isolation restrictions. Going forward, this will provide a
strong buffer for the increase in client base and traffic.
- Internal business processes have been transformed to accelerate the
digitalisation of operations, including the shift to electronic signatures
and paperless operations.
- Rostelecom's crisis action planning and response was formulated on the
basis of a set of COVID-19 scenarios that reflect economic developments
and impact on all client groups, including businesses, individual
customers and state clients. The forecasted reduction in economic activity
across a number of business streams, including SMEs, complimentary
services for people and certain state projects might have certain impact
on Rostelecom's business growth. At the same time, this potential negative
effect will be counterbalanced by the anticipated significant growth in
B2B and B2G demand for digital solutions for remote working, online
learning and other services.
- These forward-looking scenario planning models currently assume no job
cuts thanks to the optimization of OpEx and the deferral of other
non-critical investment projects.
- In the current environment, the management team has been focusing on the
Company's performance, ensuring that it maintains a reasonable level of
debt and ensuing that it is able to meet it dividend commitments as stated
in the Company's dividend policy.
- The Company will present revised guidance under the new perimeter of
consolidation over the coming reporting periods, as the industry is still
experiencing a high level of uncertainty regarding self-isolation, the
scope of government aid provided to households and industries hit by the
pandemic and the its macro-economic implications.
Supporting clients
Rostelecom has adapted its product line to respond to the pandemic, ensuring
that it remains a strategic and reliable digital partner to its key client
audiences.
- for SMEs Rostelecom:
- lifted the blocking of certain services [2] with zero account
- added 100 extra minutes of mobile connectivity and 10Gb of Internet
capacity [3] for existing clients
- introduced a 60-day test period for mobile and virtual telephony [4]
for new clients.
- Rostelecom also developed a set of services for remote working [5] for
large clients, including:
1) access to public and corporate resources based on broadband, VPN and
virtual data;
2) reliable and seamless connection based on Hosted PBX, 8-800 toll free
numbers and mobile services; and
3) remote control and information security services.
- A brand-new heat-detection solution [6] was introduced based on thermal
imaging cameras and software that can be integrated with any corporate
system. The service has been introduced by a number of companies,
including ALROSA [7];
- A new "Dedicated virtual conference room" product was developed that
provides companies with the possibility to roll out an owned virtual
server with all the software required for their needs;
- Audio and video conferencing capacity was more than doubled;
- The "Rostelecom Liceum" digital service was commissioned and developed
for primary school students. The service is available for RUB 1 across all
Russian regions providing access to two platforms "School" and
"Development";
- Rostelecom started to support the public COVID-19 information contact
centre ???????????????.??, which provides guidance to support people
during the coronavirus pandemic;
- Free access to five best culture and art TV channels was provided and a
collection of more than 5000 national and international movies, series,
kids, entertainment and educational content on the digital platform Wink
[8];
- maximum Internet speed capacity [8] was increased for those who work and
study from home;
- for Tele2 Russia mobile clients:
- Hotline traffic limits were reset and access was provided to the
public COVID-19 information contact centre ???????????????.??;
- provided free access to messengers to those stranded abroad;
- Extra data added to the data plans of those following guidelines
around self-isolation.
KEY ACHIEVEMENTS
- Revenue grew by 10% year-on-year;
- Mobile services grew by 16% year-on-year;
- Sales in digital services increased by 63% year-on-year;
- OIBDA grew by 12%;
- Free Cash Flow (FCF) [4] improved more than twofold.
FIRST QUARTER 2020 FINANCIAL HIGHLIGHTS
- Revenue grew by 10% to RUB 121.6 billion;
- OIBDA up by 12% to RUB 47.1 billion;
- OIBDA margin grew by 0.7 p.p. to 38.7%;
- Net profit increased by 1% to RUB 7.7 billion;
- CAPEX[5] excluding state programmes decreased by 15% to RUB 22.0 billion
(18.1% of revenue) compared to 1Q 2019;
- Free Cash Flow (FCF) improved more than twofold to RUB (5.9) billion;
and
- Net debt[6] increased by 18% since the beginning of the year to RUB
392.8 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.
Key figures for 1Q 2020, RUB mln
RUB million 1Q 2020 1Q 2019 change, y-o-y
Revenue 121,613 110,225 10%
OIBDA 47,082 41,865 12%
OIBDA margin % 38.7% 38.0% -
Operating Income 18,947 16,764 13%
Operating margin % 15.6% 15.2% -
Net Income 7,712 7,667 1%
% of revenue 6.3% 7.0% -
Capital Expenditure 21,997 25,749 (15%)
(MORE TO FOLLOW) Dow Jones Newswires
May 19, 2020 02:33 ET (06:33 GMT)
DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -2-
% of revenue 18.1% 23.4% -
Net debt 392,821 333,924 18%
Net debt/ annualised OIBDA 2.2 2.0 -
FCF (5,946) (15,518) 9,572
Mikhail Oseevskiy, President of Rostelecom, commented:
"Rostelecom Group's consolidated results for the first quarter of this year
reflect the first contribution from the full integration of Tele2 Russia.
Together, we have managed to increase revenue and OIBDA by 10% and 13%
respectively. We are also seeing continuous growth in net income and have
increased FCF more than twofold. The main goals of consolidating 100% of
Tele2 Russia into Rostelecom are already being realized and we are getting
closer to creating Russia's largest integrated provider of digital services,
capable of significantly improving financial performance, strengthening and
consolidating our leading position in the Russian telecommunications, IT and
other high-tech industries. The management greatly appreciates the
contribution of the most rapidly growing mobile operator in the world[7] to
the group's overall performance. Prospects for its continuing success and
development are also good.
Despite the strong results generated by the first months of our new
integrated business by the end of the first quarter, like the majority of
companies around the world, we are facing unprecedented challenges
associated with the Covid-19 pandemic. At the same time, as a modern
high-tech company, which has undergone a huge path of digital
transformation, the transition to remote working wasn't challenging for us.
We have invested heavily to ensure that employees whose tasks are unable to
be carried out remotely, such as ensuring that our network infrastructure
and vital facilities are running smoothly, are able to do so safely.
In addition to securing the safety of all employees, the Company's main goal
has been to help clients adapt to a new reality by providing them with
convenient digital solutions that enable them to quickly restructure their
operations. This has enabled the work of state and corporate clients to
continue operating on-line with minimal interruption. We have quickly
adjusted to the needs of all types of customers, offering them service
packages that meet the challenges of this new paradigm.
Today, humanity is going through perhaps one of the most difficult periods
in its new history, and a long period of recovery is ahead of us. Together,
we are capable of making it through the challenging times ahead. As a
provider of digital solutions, we will make this time for our customers less
painful. We will minimise the impact of the crisis and will help unleash
their potential, reframed against the context of the new realities of our
market. Together, we will come out of the crisis stronger with greater
efficiency and resilience.
Crisis is a time of great change and opportunity. My colleagues and I on the
Rostelecom management team see prospects for further long-term growth for
the Company. Changes in lifestyles and business approaches, associated with
the need for a rapid and mass transition of people to online communication
and offline remote work, will strengthen the role of telecommunications and
IT companies in the economy. This trend gives added impetus to the
development of technologies and communication networks. Data processing and
storage infrastructure also gains importance to help absorb an avalanche of
traffic while providing sufficient bandwidth, network stability, and most
importantly - to provide a wide range of popular digital services to the
population, business, the State."
Vladimir Kirienko, First Vice-President of Rostelecom, said:
"We had a good start to the year, supported by the expansion of the digital
segment and the success of Tele2 Russia's mobile business. The beginning of
spring was a time of serious testing and intensive work to support clients
during a period of reconfiguration of their daily lives and business
processes due to the spread of Covid-19. In response to the pandemic,
Rostelecom offered clients a special package of services to help them
operate without any interruption. These are proven and effective solutions
that enable business processes to continue in the new environment.
Rostelecom's range of remote access solutions and information resources
includes Internet access services, virtual private networks (VPNs) and
secure remote access solutions. These are accompanied by virtual data center
services, and DDoS attacks mitigation.
One of many initiatives to have been well received includes unique
intelligent systems that provide high-precision remote monitoring of
people's body temperature using thermal imaging. This service will be in
high demand after the pandemic is over. We are introducing this service
turnkey, and it has already been purchased by a number of large enterprises,
including Alrosa, one of the leaders in the world diamond mining industry.
We have also delivered digital services to retail customers, specifically to
citizens who face the challenges presented by self-isolation. These
customers require highly reliable Internet connectivity, dependable mobile
and fixed communications to enable them to pursue online learning,
self-development and obtain critical public services remotely. As a socially
responsible company, during the pandemic, Rostelecom has provided free
access to a large library of content, increased connection speeds as much as
possible, and granted deferrals of payments. Our digital solutions enable us
to help citizens, businesses and the State to function despite the
challenges presented by the spread of coronavirus infection.
The self-isolation regime is forcing people and business to function
digitally. As a conduit for such solutions, Rostelecom is ready to help
clients transition operations after the pandemic is over to ensure that
online activity is convenient, efficient and uninterrupted when it is needed
the most."
Sergey Anokhin, Senior Vice President and Chief Financial Officer added:
"The opening months of 2020 delivered strong financial results and a good
backlog of business for the rest of the year. In response to the pandemic,
the company has developed several scenarios when it comes to how we will
respond to the developing situation in the economy, how the corporate
economic activity may vary, and what the population and state institutions
will require. An action programme for each of the scenarios has been
adopted. We are expecting a decline in economic activity in a number of
areas, which may cause growth in Rostelecom's business to slow. At the same
time, we are also seeing a significant increase in the demand for digital
services and solutions relating to the digitalization of infrastructure from
large corporations, as well as the introduction of digital solutions for
remote working and learning. Demand is coming from both the public and
private sectors, opening up additional opportunities and growth triggers for
Rostelecom. But we also see a high level of uncertainty regarding on-going
self-isolation, the scope of government aid to the households and industries
hit by the crises and how macro indicators are going to develop. Taking
account of these factors, Rostelecom will update the market on the guidance
under the new perimeter of consolidation in the coming reporting periods. To
ensure business processes remain in continuity and financial stability,
Rostelecom has digitalized its interaction with financial partners. This has
enabled us to mitigate the impact of the outbreak on our plans to attract
financing, seal leasing deals, and use the full range of other financial
instruments available on the market. To ensure our resilience in the new
environment, we have adapted the ways we analyze and report on liquidity
monitoring and forecast, inventories and supply chains management and
financial controls across all business units. The above mentioned measures,
along with the promotion of paperless operations and introduction of digital
signature both internally within the Group and externally with clients and
counterparties, has ensured the seamless shift to the new reality without
losing pace and compromising our business development plans."
KEY OPERATING HIGHLIGHTS
Fixed-line business
Number of 1Q 2020 1Q change, y-o-y 4Q 2019 change,
subscribers 2019 y-o-y
(million):
Internet access 13.2 13.0 2% 13.2 0.2%
B2C: Broadband 12.2 12.0 1% 12.2 0.3%
B2B: Broadband 1.1 1.0 6% 1.1 0.1%
+ VPN
Pay TV 10.5 10.2 3% 10.4 1%
Incl. IPTV 5.7 5.4 6% 5.6 2%
Local telephony 15.3 17.0 (10%) 15.7 (2%)
services
ARPU[8] (RUB): 1Q 2020 1Q 2019 change, y-o-y 4Q 2019 change,
y-o-y
Internet
access
B2C: Broadband 397 397 0% 402 (1%)
B2B: Broadband 3,368 3,266 3% 3,455 (3%)
+ VPN
Pay TV (B2C) 257 249 3% 255 1%
Incl. IPTV 319 317 1% 320 0%
Blended 551 543 1% 553 0%
ARPU[9]
Mobile business
1Q 2020 1Q 2019 change, y-o-y 4Q 2019 change,
y-o-y
Data Traffic, 1,086.5 643.2 69% 988.7 10%
(MORE TO FOLLOW) Dow Jones Newswires
May 19, 2020 02:33 ET (06:33 GMT)
DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -3-
incl. MVNO,
Eb
Churn, % (8.6%) (9.3%) 0.7 p.p. (9.3%) 0.7 p.p.
Growth of 36.1% 37.7% (1.6 p.p.) 39.1% (3.? p.p.)
active mobile
data users ,
%
1) The total number of Internet subscribers among households grew by 1% to
12.2 million in the first quarter of 2020 compared to the corresponding
period of last year; ARPU was RUB 397.
2) The total number of B2B Internet and VPN subscribers increased by 6%
year-on-year to 1.1 million; ARPU grew by 3% year-on-year to RUB 3,368.
3) The number of pay-TV subscribers grew by 3% to 10.5 million households
compared to the corresponding period of last year with ARPU of RUB 257, up
3% year-on-year;
? The number of IPTV subscribers increased by 6% to 5.7 million with ARPU
of RUB 319.
4) The number of active mobile users grew by 36.1% year-on-year while
mobile data traffic jumped by 69%; at the same time churn of cellular
customer base decreased by 0.7pp to 8.6%.
5) The number of local telephony subscribers decreased by 10% to 15.3
million.
KEY EVENTS RELATING TO 1Q 2020 AND AFTER THE END OF THE REPORTING PERIOD
Business news
? Rostelecom continues to develop and expand its range of products and
services:
? A new product line of tariffs and packages, including Internet, IPTV and
mobile services has been introduced;
? New TV channels offer (Transformer, Maximum and Premium) and
subscription to Superhit videos have been introduced for the users of Wink
digital entertainment platform;
? As part of the Gaming tariff plan, Rostelecom has renewed the set of
options in Mail.ru MY.GAMES, and launched a new offer in World of Warships
with extra gaming bonuses available to the clients and users of Wargaming
games;
? As part of the "Smart Home" ecosystem:
? new option for intelligent video monitoring, including motion tracking
features available on all moving cameras from Rostelecom. Cameras with
audio now have a siren function;
? in the first three months of 2020 the sales of home CCTV cameras with
cloud storage jumped by 87% to total 51,000;
? launched a new "Smart control and access management" platform which
simplifies the resident organisation database by home & property
management firms. The platform enables individual accounts to be created
for tenants, who can be "electronically lodged" in the system using RFID
tags;
? Launched a "Smart metering" solution to facilitate measurements within
one household or one building.
? Rostelecom continues to grow its digital segment:
? The number of Wink digital platform users surpassed 1 million;
? Revenue from Smart Home ecosystem soared by 87%;
? Revenue from Data Centre jumped by 92%;
? Broadband revenue in the B2C fibre segment grew by 7%;
? Sales of antivirus products increased by 27%;
? As part of the development of its cybersecurity offering:
? revenues grew fivefold, partially driven by more active regional
sales;
? Rostelecom renewed a number of its services, including its DDoS attack
mitigation product, Solar appScreener code analyzer, IGA platform Solar
inRights and Solar webProxy firewall;
? Signed the largest international contract in IT security to supply
Solar appScreener to Singapore airlines.
? Rostelecom continues to grow its cloud services segment for B2B:
? Sales of the Virtual PBX offering grew by 46%;
? As part of the Virtual Data Centre offering:
? revenues grew threefold;
? commissioned infrastructure for the TrueConf cloud video conferencing
product;
? Data Centre Basic offering was launched for clients with minimal
functionality requirements and SLA;
? The first segment of virtual Data Centre was launched on the Russian
cloud platform Tionix;
? Tionix Virtual Security product was launched, with built-in means of
protection from unauthorized users for extra security of personal data
stored in the cloud;
? Clients can now migrate their systems on various physical sites into
one centralised infrastructure which will provide better reliability and
accessibility of the IT systems in the cloud;
? Signed contracts to assist the migration of Russian Ministries and
State Departments into one single cloud platform (Ministry of Labour,
Ministry of Justice, Rostekhnadzor (Federal Service for Ecological,
Technological and Nuclear Supervision), Rosimushchestvo (Federal Agency
for State Property Management), GFS Russia, Federal Archival Agency;
? New cloud data centre sections were commissioned in Moscow and
Yekaterinburg which now enables Rostelecom's clients to enjoy the
existing virtual storage facilities in seven different sites (four in
Moscow and two in Novosibirsk and Adler)
? Rostelecom was ranked first among data centre providers [9] in Russia
in 2019, according to IKS Consulting. Following the acquisition of
DataLine the Company's market share reached 26% by the number of racks
commissioned in Russia;
? The DataLine acquisition expanded Rostelecom's leadership in the
market by a total number of 11,500 thousand racks.
? Rostelecom signed a number of large contracts, including agreements with
Yandex, Promsvyazbank, Gazprombank, Roscosmos, Information centre of the
Judicial Department, the General Radio Frequency Centre, Russian Treasury,
Public Prosecution Service, Russian Pension Fund and other organizations;
? Rostelecom has been ranked at the top of the independent rating by J'son
& Partners Consulting [10] by the number of pay-TV subscribers in B2B in
2019;
? Rostelecom has been ranked first [11] in the b2b cloud
video-surveillance market, according to TelecomDaily;
? Rostelecom has been ranked first [12] by the number of users of virtual
telephony services, according to TMT consulting;
? Rostelecom has been ranked first [13] in the 8-800 toll-free services
according to TMT consulting;
? Rostelecom has been ranked first [14] in the b2b broadband market
according to TMT consulting;
? Revenues from Rostelecom's O2O[10] project increased by 40%;
? Transit Europe-Asia (TEA) route upsell with further contracts of
200Gb/s;
? Rostelecom's subsidiary mobile operator Tele2 has been expanding
rapidly, maintaining high standards of services and level of client
support. In the reporting period Tele2 has:
? launched of 5G cloud games [15] on the GFN.ru platform with access to;
? developed an anti-fraud platform for call number tracking;
? doubled the My Tele2 app user base;
? become the fastest growing mobile operator [16][11] in the world;
Other news
? Rostelecom consolidated 100% of Tele2 [17] to create the largest
integrated digital provider in Russia;
? Rostelecom completed the deal to acquire DataLine [18], the second
largest datacentre provider in Russia;
? Rostelecom became a co-investor in the start-up portfolio of the Russian
Internet Initiatives Development Fund (IIDF) [19];
? Rostelecom registered a joint venture with VTB [20] to work with Big
Data
? Rostelecom announced the following bond placements:
? a three-year bond of total nominal value of RUB 10 billion, at a coupon
rate of 6.75% per annum;
? a three-year bond of total nominal value of RUB 15 billion, at a coupon
rate of 6.25% per annum;
? a seven-year bond of total nominal value of RUB 15 billion, at a coupon
rate of 6.65% per annum.
? Rostelecom has been included in the 2020 Bloomberg Gender-Equality Index
[21].
OPERATING REVIEW
Revenue analysis
Revenue structure by services
RUB million 1Q 2020 1Q 2019 change
Mobile services 40,963 35,232 16%
Broadband 21,993 21,043 5%
Digital services 12,520 7,696 63%
TV services 9,489 9,331 2%
Wholesale services 17,771 17,009 4%
VPN 7,026 5,225 34%
Interconnect and traffic transit 4,247 5,904 (28%)
services
Infrastructure products and services 4,064 3,457 18%
Rent of channels 2,434 2,423 0%
Fixed telephony 14,189 15,851 (10%)
Other services 4,688 4,064 15%
Total 121 613 110 225 10%
Revenue structure by customer segments
RUB million 1Q 2020 1Q 2019 change
Residential customers 62,807 59,951 5%
B2B / State clients 39,001 30,991 26%
Operators 18,845 18,224 3%
Other 960 1,059 (9%)
Total 121,613 110,225 10%
In the first quarter of 2020, revenue increased by 10% to RUB 121.6 billion,
compared to the first quarter of 2019, as a result of the following factors:
? a 16% increase in revenue from mobile services due to a higher volume of
mobile data consumption and standard voice services;
? a 63% increase in revenue from digital services, mainly due to larger
sales of cyber security services, Smart City projects, e-government
solutions, promotion of cloud and data centre services;
? a 34% increase in revenue from VPN services, mainly due to higher demand
from state and corporate clients;
? a 5% increase in revenue from broadband services due to a higher number
of subscribers and higher ARPU in the b2b segment.
Operating income analysis
Operating expenses structure
RUB million 1Q 2020 1Q 2019 change
Personnel costs (32,190) (28,555) 13%
Depreciation, Amortization and (27,128) (23,935) 13%
impairment losses
Interconnection charges (21,289) (20,197) 5%
Materials, repairs and maintenance, (9,039) (8,395) 8%
utilities
Gain on the disposal of PPE and 1,359 655 107%
intangible assets
Impairment loss of financial assets (1,163) (1,236) (6%)
measured at amortized cost
(MORE TO FOLLOW) Dow Jones Newswires
May 19, 2020 02:33 ET (06:33 GMT)
DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -4-
Other operating income 5,657 4,527 25%
Other operating expenses (18,873) (16,325) 16%
Total operating expenses (102,666) (93,461) 10%
In the first quarter of 2020, operating expenses increased by 10% compared
to the corresponding period of 2019 and amounted to RUB 102.7 billion,
largely due to the following factors:
? a 13% increase (of RUB 3.6 billion) in personnel costs, mainly due to an
increase in the number of employees within digital business segments;
? a 13% increase (of RUB 3.2 bln) in depreciation, amortization and
impairment losses, due to higher payments associated with new objects and
impairment of intangible assets;
? a 16% increase (of RUB 2.5 bln) in other operating expenses, due to
implementation of Smart City projects, as well as provision of equipment
within B2B and B2G projects, higher agent payments for financial services
in mobile commerce, recalculation of quality bonus payments;
? a 25% increase (of RUB 1.1 billion) in other operating income, mainly
due an increase in sales within the Bridging the Digital Divide project.
Operating profit increased by 13% year-on-year to RUB 18.9 billion in the
first quarter of 2020, compared to the corresponding period of 2019.
OIBDA for the first quarter of 2020 increased by 12% year-on-year to RUB
47.1 billion. OIBDA was driven by revenue growth and the above-mentioned
factors, affecting operating expenses. The OIBDA margin increased by 0.7
p.p. to 38.7% in the first quarter of 2020 compared to the corresponding
period of 2019.
Net Income Analysis
In the first quarter of 2020, profit before tax increased by 6% to RUB 10.1
billion, compared to the corresponding period in 2019.
These dynamics were influenced by the following factors:
? higher operating profit;
? higher revenue due to gains realised from the sale of a number of real
estate assets;
? negative foreign exchange rates in 2020 due to weakened national
currency.
Income tax in the first quarter of 2020 was RUB 2.3 billion compared to RUB
1.9 in the corresponding period in 2019.
Net profit increased by 1% in the first quarter of 2020 compared to the
corresponding period in 2019 and totalled RUB 7.7 billion.
Financial review
Net operating cash flow in the first quarter of 2020 increased by 14% and
amounted to RUB 17.0 billion, compared to the corresponding period of 2019.
The increase in net operating cash flow in the first quarter of 2020 was
mainly due to increase in OIBDA.
Cash outflow for investments in non-current assets, excluding state
programmes, decreased by 15% to RUB 22.0 billion (18.1% of revenue) in the
first quarter of 2020.
Free cash flow in the first quarter of 2020 more improved more than twofold
and totalled RUB (5.9) billion compared to the first quarter of 2019.
Free Cash Flow (RUB, billion)
As at March 30, 2020, the Group's total debt increased by 19% compared to
the beginning of the year and amounted to RUB 429.7 billion, partially
driven by the fundraising achieved to help complete the consolidation Tele2.
100% of the Group's total debt remained rouble-denominated as at March 30,
2020.
As at March 30, 2020, the Group's net debt increased by 18% compared to the
beginning of the year and amounted to RUB 392.8 billion. The net debt /OIBDA
ratio over the last 12 months stood at 2.2x as at 30 March 2020.
OTHER INFORMATION: CONFERENCE CALL
Rostelecom's management will hold a conference call and webcast today at
4.00 PM (Moscow), 3.00 PM (CET), 2.00 PM (UK) and 9.00 AM (NYT). To
participate in the conference call, please dial:
UK/ International: +44 (0)330 336 9411
USA: +1 323 794 2590
Russia: +7 495 646 9190
Confirmation Code (ENG): 4562217
Confirmation Code (RUS): 7728607
A webcast of the conference call will only be available in English. To
access the webcast please follow the link:
https://webcasts.eqs.com/register/rostelecom20200519/ru [22].
A replay of the conference call will be available on the Company's website
www.company.rt.ru/ir/results_and_presentations/financials/IFRS/2020/1 [23].
* * *
APPENDICES
1) Reconciliation of OIBDA;
2) Statement of Comprehensive Income for 1Q 2020;
3) Statement of Cash Flows for 1Q 2020;
4) Statement of Financial Position for 1Q 2020.
APPENDIX 1: RECONCILIATION OF OIBDA
OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company
defines as operating income before depreciation and amortisation as well as
some certain expenses. We believe that OIBDA provides useful information to
investors because it is an indicator of the strength and performance of our
business operations, including our ability to finance capital expenditures,
acquisitions and other investments and our ability to incur and service
debt.
The following indicators are not taken into account in the calculation of
OIBDA:
? Expenses related to the long-term management incentive programme,
implying accruals in personnel costs line starting from Q2, 2014;
? Expenses related to non-government pension insurance starting from Q3,
2018.
RUB million 1Q 2020 1Q 2019 change
Operating income 18,947 16,764 13%
Plus amortisation 27,128 23,935 13%
Plus expenses related to the long-term 714 887 (19%)
management incentive programme
Plus expenses related to non-government 293 279 5%
pension insurance
OIBDA 47,082 42,144 12%
OIBDA margin, % 38.7% 38.0%
APPENDIX 2: Statement of Comprehensive Income for 1Q 2020
Three-month period ended 31
March (unaudited)
2020 2019 (restated)*
Revenue 121,613 110,225
Operating expenses
Wages, salaries, other benefits (32,190) (28,555)
and payroll taxes
Depreciation, amortization and (27,128) (23,935)
impairment losses
Interconnection charges (21,289) (20,197)
Materials, utilities, repairs and (9,039) (8,395)
maintenance
Gain on disposal of property, 1,359 655
plant and equipment and intangible
assets
Impairment loss of financial (1,163) (1,236)
assets measured at amortized cost
Other operating income 5,657 4,527
Other operating expenses (18,873) (16,325)
Total operating expenses, net (102,666) (93,461)
Operating profit 18,947 16,764
Share of net profit/(loss) of 166 (29)
associates and joint ventures
Finance costs (8,272) (8,058)
Other investing and financial 646 10
gain, net
Foreign exchange (loss)/gain, net (1,433) 841
Profit before income tax 10,054 9,528
Income tax expense (2,342) (1,861)
Profit for the period 7,712 7,667
Other comprehensive income/(loss)
Other comprehensive income/(loss)
to be reclassified to profit or
loss in subsequent periods
Exchange differences on 419 (225)
translation of foreign operations
Other comprehensive income/(loss) 419 (225)
for the period, net of tax
Total comprehensive income for the 8,131 7,442
period
Profit attributable to:
Equity holders of the Group 7,509 7,496
Non-controlling interests 203 171
Total comprehensive income
attributable to:
Equity holders of the Group 7,928 7,258
Non-controlling interests 203 184
Earnings per share attributable to 2.91 3.28
equity holders of the Group -
basic (in roubles)
Earnings per share attributable to 2.85 3.18
equity holders of the Group -
diluted (in roubles)
* The amounts shown here do not correspond unaudited management interim
condensed consolidated statement of profit or loss and comprehensive income
for the three-month period ended 31 March 2019 and reflect application of
pooling of interest method applied toT2 RTK Holding LLC acquisition till
100% share.
APPENDIX 3: Statement of Cash Flows for 1Q 2020
Three-month period ended 31
March (unaudited)
2020 2019 (restated)*
Cash flows from operating
activities
Profit before tax 10,054 9,528
Adjustments to reconcile profit
before tax to cash generated from
operations
Depreciation, amortization and 27,128 23,935
impairment losses
Gain on disposal of property, (1,359) (655)
plant and equipment and intangible
assets
Impairment loss of financial 1,163 1,236
assets measured at amortized cost
Share of net profit/(loss) of (166) 29
associates and joint ventures
Finance costs excluding finance 8,261 8,042
costs on employee benefit
obligations
Other investing and financial (646) (10)
gain, net
Foreign exchange loss/(gain), net 1,433 (841)
Share-based motivation program 772 856
(MORE TO FOLLOW) Dow Jones Newswires
May 19, 2020 02:33 ET (06:33 GMT)
DJ ROSTELECOM PJSC: Rostelecom announces its IFRS -5-
Increase in accounts receivable (9,378) (10,178)
and contract assets
Increase in employee benefits 257 243
Decrease/(increase) in inventories 407 (44)
Decrease in accounts payable, (10,909) (6,216)
provisions and accrued expenses
Increase in other assets (1,488) (5,586)
Increase in other liabilities 1,425 3,661
Cash generated from operations 26,954 24,000
Interest paid (7,430) (7,824)
Income tax refund 7 72
Income tax paid (2,497) (1,262)
Net cash from operating activities 17,034 14,986
Cash flows from investing
activities
Purchase of property, plant and (26,025) (31,719)
equipment and intangible assets
Proceeds from sale of property, 1,617 900
plant and equipment, intangible
assets and assets held for sale
Acquisition of financial assets (2,347) (971)
Proceeds from disposals of 1,109 1,399
financial assets
Interest received 199 119
Subsidy from Government 1,229 196
Dividends received 52 188
Purchase of subsidiaries and (113,366) (301)
business, net of cash acquired
Acquisition of equity accounted (25) (346)
investees
Net cash used in investing (137,557) (30,535)
activities
Three-month period ended 31
March (unaudited)
2020 2019 (restated)*
Cash flows from financing
activities
Issue of share capital 66,000 -
Proceeds from bank and corporate 342,307 181,372
loans
Repayment of bank and corporate (305,630) (161,568)
loans
Proceeds from bonds 30,000 -
Repayment of bonds (4) -
Repayment of vendor financing (2) (2)
payable
Proceeds from other non-current (7) -
financing liabilities
Repayment of lease liabilities (3,590) (2,197)
Acquisition of non-controlling (20) (398)
interests
Dividends paid to shareholders of - (5,688)
the Group
Dividends paid to non-controlling (233) -
shareholders of subsidiaries
Net cash from financing activities 128,821 11,519
Effect of exchange rate changes on (30) (57)
cash and cash equivalents
Net increase/(decrease) in cash 8,268 (4,087)
and cash equivalents
Cash and cash equivalents at 19,955 10,492
beginning of the period
* The amounts shown here do not correspond unaudited management interim
condensed consolidated statement of profit or loss and comprehensive income
for the three-month period ended 31 March 2019 and reflect application of
pooling of interest method applied toT2 RTK Holding LLC acquisition till
100% share.
APPENDIX 4: Statement of Financial Position for 1Q 2020
31 March 31 December
2020 2019
(unaudited) (restated)*
Assets
Non-current assets
Property, plant and equipment 523,191 522,492
Goodwill and other intangible assets 132,720 127,122
Right of use assets 50,476 49,189
Trade and other accounts receivable 6,553 5,642
Investments in associates and joint 9,096 8,892
ventures
Other financial assets 4,116 2,667
Other non-current assets 11,447 10,119
Deferred tax assets 10,666 10,255
Contract assets 1,001 866
Contract costs 15,108 14,647
Total non-current assets 764,374 751,891
Current assets
Inventories 9,710 9,793
Contract assets 6,799 4,480
Contract costs 728 920
Trade and other accounts receivable 54,407 49,179
Prepayments 7,536 7,845
Prepaid income tax 3,395 868
Other financial assets 8,634 8,888
Other current assets 5,321 6,264
Cash and cash equivalents 28,223 19,955
Asset classified as held for sale 790 749
Total current assets 125,543 108,941
Total assets 889,917 860,832
Equity and liabilities
Equity attributable to equity holders
of the Group
Share capital 95 93
Treasury shares (20,279) (53,391)
Retained earnings and other reserves 196,781 264,231
Total equity attributable to equity 176,597 210,933
holders of the Group
Non-controlling interests 4,766 4,564
Total equity 181,363 215,497
Non-current liabilities
Loans and borrowings 374,903 280,570
Lease liabilities 43,653 42,355
Employee benefits 6,138 5,881
Deferred tax liabilities 41,699 38,245
Accounts payable and accrued expenses 1,509 1,486
Contract liabilities 16,308 17,472
Provisions 4,683 4,418
Other non-current liabilities 20,289 19,052
Total non-current liabilities 509,182 409,479
Current liabilities
Loans and borrowings 54,775 81,277
Lease liabilities 10,671 9,971
Accounts payable and accrued expenses 73,800 86,513
Income tax payable 2,073 2,692
Contract liabilities 31,995 31,353
Provisions 7,496 7,283
Other financial liabilities 146 164
Other current liabilities 18,416 16,603
Total current liabilities 199,372 235,856
Total liabilities 708,554 645,335
Total equity and liabilities 889,917 860,832
* The amounts shown here do not correspond to the audited consolidated
statement of financial position as of 31 December 2019 and reflect
application of pooling of interest method applied toT2 RTK Holding LLC
acquisition till 100% share
Rostelecom [24] is the largest integrated digital services and products
provider, operating in all segments of the telecommunications market in
Russia. The Company serves millions of households, state and private
enterprises across the country.
Rostelecom is Russia's undisputed market leader, providing high-speed
Internet access and pay-TV. The total number of broadband users stands at
over 13.2 mln users, it has more than 10.5 mln pay-TV customers, over 5.7
mln of which are subscribed to Rostelecom's IPTV services. Tele2 Russia, a
Rostelecom subsidiary , is a major player in the mobile market with over 44
mln subscribers and the industry-leading NPS, a customer satisfaction
benchmark.
In the first quarter of 2020, the Group generated RUB 121.6 bln of revenues,
RUB 47.1 bln of OIBDA (38.7% of revenue) and RUB 7.7 bln of net income.
The Group is the leading provider of telecommunications services to
government bodies and corporates of all levels.
Rostelecom is a key strategic innovator that provides solutions in the
following fields: E-Government, cybersecurity, data-centers and cloud
computing, biometry, healthcare, education and housing & utility services.
The Group's stable financial position is confirmed by its credit ratings.
Rostelecom has been assigned 'BBB-' and 'BB+' international credit ratings
by Fitch Ratings and Standard & Poor's respectively, and AA(RU) by ACRA.
* * *
Certain statements in this press release are forward-looking statements
within the meaning of the U.S. federal securities laws and intended to be
covered by the safe harbours created thereby.
Those forward-looking statements include, but are not limited to:
? Assessment of PAO Rostelecom's (the Company) future operating and
financial results as well as forecasts of the present value of future cash
flows and related factors;
? The Company's plans to take ownership stakes in other organisations;
? the Company's anticipated capital expenditures and plans to construct
and modernize its network;
? the Company's expectations as to the growth in demand for its services,
plans relating to the expansion of the range of its services and their
pricing;
? the Company's plans with respect to improving its corporate governance
practices;
? the Company's expectations as to its position in the telecommunications
market and forecasts on the development of the market segments within
which the Company operates;
? economic outlook and industry trends;
? the Company's expectations as to the regulation of the Russian
telecommunications industry and assessment of impact of regulatory
initiatives on the Company's activity;
(MORE TO FOLLOW) Dow Jones Newswires
May 19, 2020 02:33 ET (06:33 GMT)
? other statements regarding matters that are not historical facts.
Such forward-looking statements are subject to risks, uncertainties and
other factors, which could cause actual results to differ materially from
those expressed or implied by these forward-looking statements. These risks,
uncertainties and other factors include:
? risks relating to changes in political, economic and social conditions
in Russia as well as changes in global economic conditions;
? risks relating to Russian legislation, regulation and taxation,
including laws, regulations, decrees and decisions governing the Russian
telecommunications industry, securities industry as well as currency and
exchange controls relating to Russian entities and their official
interpretation by regulatory bodies;
? risks relating to the Company, including the achievement of the
anticipated results, levels of profitability and growth, ability to create
and meet demand for the Company's services including their promotions, and
the ability of the Company to remain competitive in a liberalized
telecommunications market;
? technological risks associated with the functioning and development of
the telecommunications infrastructure, technological innovations as well
as the convergence of technologies;
? other risks and uncertainties. For a more detailed discussion of these
and other factors, see the Company's Annual Report and the Company's other
public filings.
Many of these factors are beyond the Company's ability to control or
predict. Given these and other uncertainties, readers are cautioned not to
place undue reliance on any of the forward-looking statements contained
herein or otherwise. The Company does not undertake any obligation to
release publicly any revisions to these forward-looking statements (which
are made as of the date hereof) to reflect events or circumstances upon the
annual report publication or to reflect the occurrence of unanticipated
events, except as may be required under applicable laws.
=---------------------------------------------------------------------------
[1] Tele2 results taken into account
[2] Here and below, please refer to Attachment 1 of this statement for a
full definition of OIBDA.
[3] International financial reporting standards
[4] Here and below, Free Cash Flow (FCF) is calculated as net cash from
operating activity minus CAPEX, plus proceeds from selling fixed assets and
intangible assets, plus interest received, plus subsidy from government.
[5] Here and below, capital expenditure ("CAPEX") comprises cash spent on
fixed assets and intangible assets.
[6] Here and below, Net Debt is calculated as total debt less cash, cash
equivalents and short-term investments (other financial assets).
[7] The conclusion made based on the Analysis Mason database - the
international firm specialized in telecom and media consulting
[8] Average revenue per user
[9] Blended ARPU includes revenue from broadband, IPTV and digital cable TV
[10] Operator to operator
[11] Based on the data from Analysys Mason, global consulting and research
firm specialising in telecoms, media and digital services
ISIN: US7785291078
Category Code: QRF
TIDM: RKMD
LEI Code: 2534001D752JPNM0H170
Sequence No.: 64553
EQS News ID: 1050277
End of Announcement EQS News Service
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